The Hindu Business Line : Favourable decisions nullified

Every year, some of the decisions favourable to taxpayers are nullified in the Budget by amending the provisions of law. Budget 2009 is no exception and the decisions which have been nullified, though not explicitly stated in the memorandum explaining the changes, are listed below.

Housing Project

In respect of housing projects, in Radhe Developers vs ITO (2008 23 SOT 420 Ahdmedabad), the tribunal held that a taxpayer developing and building a housing project even as a contractor could claim deduction under Section 80-IB(10). In the Budget, Section 80-IB(10) has been amended to nullify the impact of this decision by inserting an explanation to the provision. The change is retrospectively applicable from April 1, 2001.

Immovable property

Section 50C, inserted by Finance Act, 2002, provides for adopting deemed sale consideration for computing capital gains on transfer of any immovable property. In Navaneet Kumar Thakkar vs ITO (2008 110 ITD 525 Jodh SMC) it was held that Section 50C could be applied only where there is a document and it is subjected to stamp valuation by the prescribed authority.

Where the document is not meant for registration, Section 50C would not apply. Now, even where the document is not registered, the value to be adopted for capital gains purpose would be the amount that would have been determined by the registering authority if it was referred to him. Fortunately, this amendment is prospectively applicable from October 1, 2009, and hence would not upset the transactions carried out so far.

Search authorisation

For authorising search, whether Additional Director or Additional Commissioner is empowered to do so was challenged in Raghu Raj Pratap Singh vs Assistant CIT (2006) 179 Taxman 73 (Allahabad). It was held that the term ‘Joint Director’ or ‘Joint Commissioner’ does not include Additional Director or Additional Commissioner and thus the search proceedings were quashed.

Now, by means of an amendment to Section 132, Additional Director or Additional Commissioner is also an authorised officer for search and it is retrospectively applicable from June 1, 1994.

Penal interest for TDS

In Mahindra & Mahindra Ltd vs Deputy CIT (2009 30 SOT 374 Mumbai), the time limit for initiating proceedings under Sections 201(1) and 201(1A) was prescribed as four or six years, similar to Section 149 meant for reassessment of income. The time limit for passing the order was also stated as equivalent to the time limit prescribed in Section 153(2).

In the Budget, the time limit for passing the order under Section 201(1) has been prescribed as two years from the end of the financial year where the statement of tax deduction is filed by the taxpayer. Where no such tax deduction statement is filed, the time limit is prescribed as four years for passing the order under Section 201(1). The time limit so prescribed by means of amendment however would be applicable from the next fiscal.

Provision for diminution

In Deepak Nitrite Ltd vs Deputy CIT (2009 117 ITD 143 Ahmedabad), it was held that the provision made for diminution in value of asset would not go to increase the book profit tax. By way of amendment, a clause has been inserted in the Explanation to Section 115JB for increasing the MAT by adding back any such provision made. The change is made on retrospective basis and thus would nullify the aforementioned decision.

(The author is an Erode-based chartered accountant.)